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U.S. equity futures slipped Tuesday, while the dollar and Treasury yields advanced, as investors continue to look ahead to inflation data and earnings reports later in the week while repricing the chances of a spring Federal Reserve rate cut.
Stocks ended their best session since November to start the week, with powerful gains for the so-called Magnificent 7 megacap tech names driving the Nasdaq to a 2.1% gain. A pullback in Treasury bond yields helped lift the S&P 500.
The New York Fed’s closely tracked survey of inflation expectations showed consumers are forecasting their softest year-ahead projections for price increases in three years, paired with a slump in global crude oil that has domestic gasoline prices testing $3 per gallon over the coming week.
That’s keeping bets on a series of Fed rate cuts alive heading into Thursday’s December inflation report. Also helping: commentary from Fed officials suggesting that policy is sufficiently restrictive to bring consumer-price pressures back to the central bank’s 2% target.
“My view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time,” Fed Gov. Michelle Bowman told a banking event in South Carolina last night.
“Should inflation continue to fall closer to our 2% goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive,” he added.
Traders put the chances of a March rate cut at around 57.3%, according to CME Group’s FedWatch, with the odds of a follow-on move in May pegged at around 47.9%.
Benchmark 10-year Treasury note yields were marked modestly higher heading into the start of the trading session at 4.042%. Traders are eyeing the first coupon bond auctions of the year later today with a $52 billion sale of new 3-year notes.
Benchmark 2-year notes are trading at 4.379% while the U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.22% higher at 102.432.
JPMorgan (JPM) – Get Free Report will lead a parade of big-bank earnings Friday to kick off the start of the fourth-quarter-earnings season. Analysts are looking for collective S&P 500 profits to rise 5.2% from a year earlier to a share-weighted $457.2 billion.
On Wall Street, stocks are set for a softer open, with futures contracts tied to the S&P 500 indicating an 18-point opening-bell decline, following on from last night’s 66-point advance.
Futures tied to the Dow Jones Industrial Average are suggesting a 135-point decline while those linked to the Nasdaq suggest an 85-point dip at the start of trading.
In overseas markets, Europe’s Stoxx 600 was marked 0.17% lower in early Frankfurt trading, matching the 0.13% decline for the regionwide MSCI ex-Japan benchmark in Asia.
Japan’s Nikkei 225, meanwhile, returned to its Old Age Day holiday to rise 1.16% on the session, lifting the index to a fresh 33-year intraday high of 33,990.28 points.
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